 Wow, it's November already! Are you busy shopping for Christmas or do you have holiday parties planned out already? Generally people are generous around Christmas time. Here's a question for you: if you budget your Christmas spending, should you also budget your Christmas giving? Does it sound strange to have a budget for donations? Short answer is no. You may get a lot of requests for donations as it gets closer to Christmas. Having a budget will allow you to know that you're not giving beyond what you're willing to give. And yes, it's ok to turn down donation requests. Anyhow, November is Financial Literacy Month in Canada. The government of Canada has a website dedicated to this: https://www.canada.ca/en/financial-consumer-agency/campaigns/financial-literacy-month/about.html Check it out. There is so much information there. Now, let's get right to this month's tax and money tips. 1. Let’s start with a basic principle. Income - Expenses = Net Income Income is not just your salary, it may include government benefits, investment income, rental income, pension, or others. If you receive company benefits, you may want to convert it to dollar equivalent and count it as your income to get a true picture of all sources of your income. Your actual income may be higher than you think. Whether a lot or a little, your income MUST always be greater than your expenses. If you can’t cut your expenses, you need to increase your income. If you need help with budgeting here are some resources you can look into. a. The Government of Canada has a website dedicated to money topics and there is a lot of good information and tools there. Check out canada.ca/money b. McGill University also offers free personal finance courses. Check out https://mcgillpersonalfinance.com/ c. I listened to a podcast today from Money Wise; the topic was Budgeting Basics. Here is the link to listen to it: https://www.moneywise.org/moneywise/budgeting-basics-4274 2. If you believe God owns everything, then you are just a manager of what He has entrusted to you. Have you been managing it well? How much of His money are you giving back to Him via tithing or giving? How much of His money are you using for yourself? Did you know that there are more than 2,000 verses about money in the Bible? Here is a catalog of 2,350 Verses on Money and Possessions from Compass: https://compass1.org/wp-content/uploads/2022/02/2350-Verses-Catalog.pdf Were you surprised that there are so many verses? 3. OK, now on to tax-related financial literacy. Are you familiar with financial abbreviations in Canada such as RRSP (Registered Retirement Savings Plan), TFSA (Tax Free Savings Account), or RESP (Registered Education Savings Plan)? Did you ever wonder what GST/HST credit is? Or BCCATC? Or CCB? All these are acronyms that you probably see in a letter from CRA. So, in brief, here they are: a. The goods and services tax/harmonized sales tax (GST/HST) credit is a tax-free quarterly payment that helps individuals and families with low and modest incomes offset the GST or HST that they pay. https://www.canada.ca/en/revenue-agency/services/child-family-benefits/goods-services-tax-harmonized-sales-tax-gst-hst-credit.html b. The BC climate action tax credit (BCCATC) is a tax-free payment made to low-income individuals and families to help offset the carbon taxes they pay. https://www.canada.ca/en/revenue-agency/services/child-family-benefits/provincial-territorial-programs/province-british-columbia.html c. The Canada child benefit (CCB) is a tax-free monthly payment made to eligible families to help with the cost of raising children under 18 years of age. https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-child-benefit-overview.html Visit https://PrudentMoneyCoach.com/blog.html or follow me on LinkedIn, IG, FB, Twitter for more tax and money tips. Have a great November!
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 Photo by Priscilla Du Preez on Unsplash Happy Thanksgiving! I am grateful for so many things: health, family, work, and others. I hope you also have many things to be thankful for. Are you gathering with family and friends this Thanksgiving? Canada borders the US in the south. There are many Americans living in Canada, so I thought it would be good if I had knowledge about cross-border taxation. I decided to take a course, and I am happy to let you know that I just passed my Cross Border Taxation course from the Knowledge Bureau. Woohoo!! This month, I thought I'd share with you some things I learned from the course. 1. A big difference between Canadian and US tax systems is that the Canadian tax system uses residency, while the US tax system uses citizenship. What does it mean? Here are some examples. - If you are a US citizen, you would need to file your US taxes regardless of where you live in the world. - It is important to understand whether you are considered a US citizen or not. If you were born in the US, you are automatically a US citizen. If you were not born in the US, but one of your parents is a US citizen, you may still be considered a US citizen even if you have never lived in the US. - If you have a green card (permanent resident of the US), you have the same tax and reporting obligations as a US citizen. Did you know that even if your green card expires, you still have the same tax and reporting obligations if you have never surrendered your green card? Yup, just because your green card expires, doesn't mean your US tax obligation ceases. - Another group of people who may have to file US taxes or have US reporting obligations are those who may be caught by Substantial Presence Test (SPT). SPT is a formula that calculates the number of days you were present in the US in the last 3 years. Here's the wording from IRS website: "You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year." Source: https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test - If you have US rental income, then you definitely have to file US taxes regardless of your status. - Now, if you are a Canadian citizen, you may or may not be considered a Canadian resident for tax purposes. It depends on how strong your residential ties to Canada are. - If you are not a Canadian citizen or permanent resident, you may still be considered a Canadian resident for tax purposes. For example, an individual in Canada with a work permit may be considered a Canadian resident for tax purposes. 2. Canada has a tax treaty with many countries, including the US. This is meant to prevent double taxation. So, if you have paid tax in Canada, you may be able to claim foreign tax credit in your US tax return, or vice versa. Note that foreign tax credit may or may not be applicable to US state tax or Canadian provincial tax. This means you may pay double taxes in certain situations. 3. If you live in Canada and you or your child are a US citizen or a permanent resident, please consult a cross-border tax specialist before you open any tax-sheltered accounts such as TFSA (Tax Free Savings Account) and RESP (Registered Education Savings Plan). A cross-border tax specialist is one who understands BOTH Canadian and US taxes, not just US taxes or just Canadian taxes. You need to understand your US tax and reporting obligations before you open Canadian tax-sheltered accounts; then decide whether the benefits outweigh the compliance fees. If you think Canadian taxes are complex, US taxes are even more complex. (Yikes...!) That's all for October. Enjoy the Autumn weather! :) Disclaimer: Information provided above is intended to be general information and not tax advice. Please consult a cross-border tax specialist to get advice on cross-border tax matters. To subscribe to my monthly short money and tax tips, send an email to [email protected] with the subject "Subscribe." Visit https://PrudentMoneyCoach.com/blog.html or follow me on LinkedIn, IG, FB, Twitter for more money and tax tips. |
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